The definition of digital banking has changed significantly over the years. In 1994, Microsoft Money personal finance software, which supported online banking, changed how consumers access and manage their finances. Then, the 2007 launch of the iPhone gave way to mobile banking and from there, omni-channel banking became a top priority for many banks.
Today, digital banking means a lot more than having an intuitive mobile banking app or a well-designed website. While these are undoubtedly valuable, I believe the industry needs to rethink how we define digital banking, especially as consumer expectations continue rising. For CBW Bank, digital banking meant transforming the bank to work in real-time while remaining focused on customer needs, even as those needs evolve.
By operating in real time, banks can reduce costs, mitigate risk and provide a better customer experience, but to achieve this, banks should ensure they can access customer data in real time and then support real-time monitoring of that data. The growing number of digital channels, coupled with the widespread use of those channels, provides banks with access to massive volumes of customer data and insight from this data can be leveraged for risk management purposes. However, oftentimes, disparate systems and siloed data repositories hinder these efforts, as financial institutions need to have a comprehensive view of their customers in order to analyze potential risks.
To facilitate scalable, real-time risk scoring, banks must centralize systems to enable access to a consolidated, real-time view of data. This gives banks an opportunity to harness that data to analyze a customer’s financial activity within seconds and identify any concerns. Based on this intel, banks can establish rules and parameters for specific types of activity to promote machine learning capabilities. Using large data sets, machine learning can identify complex, nonlinear patterns within the data set and create accurate risk models that only improve their predictive power over time. This scalable approach to risk management will help banks improve operations, making them more efficient, cost-effective and compliant.
CBW Bank has taken this approach toward risk management and it has empowered our development of new digital banking products and services with compliance already built in. In other words, we have been able to innovate while easing certain regulatory burdens.
Additionally, the power of machine learning and access to real-time data has enabled our bank to anticipate customer needs, which allows us to focus our innovation efforts toward digital products and services that will provide the most value to our customer base. Many banks tend to stall their innovation and product development initiatives because it is difficult to anticipate ROI for a project if there is little clarity on whether your customers actually need that new feature or service.
With real-time data, banks gain unprecedented insight on their account holders, revealing things like customer spending behavior, payment history and even online-browsing activity. In the very near future, banks will incorporate artificial intelligence (AI) within their digital banking systems and leverage this insight to deliver a truly personalized customer experience. Companies like Amazon and Netflix are excellent at this and consumers are starting to expect the same from their financial institution. For instance, an AI-enabled digital banking system can determine that a customer has purchased a new home in a different area of town and then highlight nearby branch or ATM locations. Or, if a customer spends hundreds of dollars on flights each month, the bank can present options for credit cards that offer airline or travel rewards.
Ultimately, digital banking will become a highly personalized business model that is reflective of the relationship between the customer and their financial institution. This means digital banking will look and mean something different to each account holder.
Imagine Apple’s App Store, where customers have access to millions of products and services and can select the product that best addresses their current needs. The customer can then immediately use that product through their smartphone. The same model can be applied to digital banking. However, instead of a smartphone, customers can personalize their relationship with their bank with the most relevant, beneficial products and services based on their unique financial needs.
Digital banking is a lot more than the technology on the front-end. Responsive website design and a feature-rich mobile app are valuable offerings, but digital banking holds much more potential when banks transform their back-end systems as well. Doing so will ensure customer needs are quickly met in the most seamless way possible.
Suresh Ramamurthi, chairman and CTO of CBW Bank